Swiss incumbent sets out its fiber access strategy and is looking to share its fiber, and its rollout costs, with others

December 9, 2008

4 Min Read
Swisscom Plans $2.3B FTTx Rollout

Swisscom AG (NYSE: SCM) is the latest European carrier to come to terms with the bandwidth requirements of its business and domestic customers: The Swiss national operator says it plans to invest 2.8 billion Swiss francs (US$2.3 billion) in its "fiber-optic expansion" during the next six years. (See Swisscom Commits to FTTx.)

The move is just one of many by European operators looking to build additional fixed access capacity that will support a growing menu of bandwidth-hungry services. (See Russian Altnet Makes FTTx Plans, Dutch Hold Back on FTTH Frenzy, Swedes Top Euro FTTH Ranking, and The Future of Fiber Access.)

What makes Swisscom's move particularly interesting is its rollout strategy, which involves a search for construction partners and the laying of extra fibers that will be sold to other service providers.

Swisscom has already invested significantly in a fiber-to-the-curb (FTTC) rollout to support the delivery of VDSL2-based services, such as high-speed Internet access and Microsoft Corp. (Nasdaq: MSFT) MediaRoom-based IPTV, over the final copper connection. The carrier currently has 1.1 million domestic retail broadband customers and 95,000 IPTV (Bluewin TV) customers. (See Swisscom Reports Q3 , Swiss Nibble at IPTV, Swisscom Ramps Up DSL, and Swisscom Picks Alcatel for IPTV.)

That VDSL2 rollout, using multiservice access node (MSAN) gear from Alcatel-Lucent (NYSE: ALU), covers about 80 percent of Switzerland's 3.2 million households and has enabled Swisscom to hang on to a decent share of the broadband market: The incumbent has about 50 percent of the domestic retail market, while the cable operators, including UPC Cablecom , have about 32 percent. Other ISPs command the remaining 18 percent.

Now, though, Swisscom is facing pressure on two fronts.

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First, the bandwidth demands of services like high-definition TV are outweighing the capabilities of the standing DSL-based infrastructure. The carrier recently launched its HD video-on-demand service but noted that, to make use of the service, customers needed "an HD-ready television [and] sufficient bandwidth." (See Swisscom Offers HD VOD.)

According to Swisscom, at least 20 Mbit/s downstream is needed for HD services, and currently about 34 percent of Swiss households don't have access to that much bandwidth.

More pressing, though, is the competition Swisscom faces. Cablecom, one of UPC Broadband 's European operations, has been deploying Docsis 3.0 equipment and plans to launch 100 Mbit/s broadband and interactive TV services in the first half of 2009. (Swisscom is not alone in Europe in facing such a challenge from cable operators; see Cable Europe Touts 100-Mbit/s Offers.)

In addition, utility companies, such as ewz-Zurich, are planning FTTH rollouts that will offer symmetrical 100 Mbit/s speeds. Faced with such competition, Swisscom believes the shift from FTTC to FTTH is a "must."

So, since September, starting in Zurich, Basel, and Geneva, Swisscom has been replacing the copper links that run from its central offices with fiber. Those locations will be followed by the cities of St. Gallen, Berne, Fribourg, and Lausanne, with the aim of hooking up 100,000 homes by the end of 2009. Commercial services are due to be available some time during the first half of next year.

Fiber for others
But the carrier isn't running one fiber to each home -– it's running four. That's because it wants to preempt regulatory intervention, which has dogged its DSL business, by making separate fibers available to alternative operators. "We have a monopoly on the copper network, but we don't want a monopoly in the fiber network," says a Swisscom spokesman.

"Each cable will have four fibers, one for us and the others to sell to other operators. We're also looking for cooperation on building [the fiber access connections] to help reduce costs," adds the spokesman. Swisscom is hoping that, in exchange for one of the fibers, utility and cable companies might run the new fibers through their own ducts.

In effect, Swisscom is, if only in part, adopting an open access construction strategy that ensures the availability of dark and lit fiber to rivals that want to develop and market their own residential and business services over the new fiber access plant.

And the incumbent is already working with four ISPs -- current wholesale DSL customers VTX, green, netstream, and init7 -- on testing the new fiber access plant for its suitability for services like IPTV, as well as a range of business services for small and mid-sized enterprises (SMEs). Those ISPs are likely to either rent fibers or buy wholesale access capacity from Swisscom.

The incumbent says wholesale fiber access services will become available in March 2009, with initial downstream bandwidth of between 30 Mbit/s and 50 Mbit/s, and upstream capacity of 10 Mbit/s.

What isn't currently known, though, is how much Swisscom plans to charge for the spare fibers, and what its return-on-investment strategy entails. Those are the details that will be of particular interest to potential partners, rivals, and the Swiss and European regulators.

— Ray Le Maistre, International News Editor, Light Reading

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